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. ECONOMIC. TENDENCIES of the THEORETICAL ANALYSIS. The MANUAL in a direction 521600 "Economy" Voronezh - 2003, 2003

Elasticity and a curve of the mutual offer.

If to use the exact form of a curve of the mutual offer it is possible to analyse it in the tideway of the general concept of elasticity. Unlike the general elasticity, elasticity of a curve of the mutual offer is equal to elasticity of demand for import along a curve and is defined as percentage change of quantity of import demand, delennoe on percentage change in the relative price of import (though there is also other definition). This definition is analogue of usual definition of price elasticity of demand. An exception

Rice 8. Elasticity of demand for import lengthways offer curve is that it is defined on the basis of the relative prices instead of absolute monetary indicators.
Elasticity of import demand of a curve of the mutual offer is defined as distance OR, delennoe on distance OS. As a result in a part elasticity in ^R shows, that the curve is elastic, since OR> OS, i.e. OR/OS> 1; in a part offer curve it is not elastic, since OR/OS <1; in a part) the curve has individual elasticity, since OR/OS=1, t.o. offer curve it is usually represented consisting of 3 parts.
When the country is in an elastic part it means, that the given percent of changes in the relative prices for the imported goods will lead bolshemu to percentage change in quantity of acquired import.
When the country places in not elastic part it means, that the given percent of change in the relative prices for import will lead to smaller percentage change of quantity of import (fig. 8).
As export is analogue of the general expenses, the form offer curve can be treated the same as elasticity literally.
According to drawing 9, on plot OV (on a curve of the mutual offer) changes in terms of trade (for example, from (Rh/Ru) 1 to (Rh/Ru) 2) are accompanied by reduction of prices on U.Sootvetstvenno the country 1 aspires to consume more j demand on At is elastic, propensity to trade and export increases with 1 to 2. Directed upwards in this elastic part offer curve means, that reduction of prices on the import goods is accompanied by sale bolshego volume of export for acquisition bolshego import (therefore the country moves from the item And to the item).

jm at Drawing E.
5 4
2 1
1524 ekh
If the country is in not elastic part (fig. 9 see) it is presented by the part inclined back offer curve. We will assume, that the initial relative price (Rh/Ru) 4 crosses offer curve in t., and then increases to (Rh/Ru) 5 and it crosses offer curve in point G. It testifies that the relative prices for import have fallen, therefore the country aspires to acquire more import (increase with 4 to 5). But as demand neelastichen, the country is inclined
To expend it is less on acquisition At, that in a context offer curve means to reduce export which falls with 4 to 5.
At last, in case of individual elasticity in ^V - "watershed" between elastic and not elastic parts of a curve. At very small change of the prices from ^V or at the big change of the prices if we have vertical offer curve, there will be no changes in quantity export 3. Accordingly there will be no changes in expenses for import.
Unusual line, characteristic offer curve, is the part of this curve inclined back. It is possible to give some explanations of the economic behaviour corresponding to these various indicators of elasticity. We will shortly present one such explanation that the best to present that occurs, if terms of trade are changed also the country moves along a curve of mutual demand. When price H grows concerning the price At, parity Rh/Ru and a line of terms of trade grows becomes more abruptly, consumers of the country 1 will aspire to change their purchases from goods H to the goods At since it becomes rather cheaper. So, as a result, the more H will be available for export, the less local consumers will wish to consume H.Etot's goods a substitution effect serves to make offer curve directed upwards since with other things being equal the increase in the prices on H associates with growth of quantity exported H.
When price H grows concerning the price At, manufacturers of the country 1 will aspire to make more H and less At, that the industrial effect is defined by possibility of higher yield in production H in comparison with U.Etot strengthens a substitution effect as soon as with increase in production H the increasing quantity H will be directed for export. Therefore the industrial effect, with other things being equal, also tends to do offer curve directed upwards when rather more heavy prices on H stimulate bolshy volume of export X.
At last, when the prices for goods H grow concerning the prices for the goods At, clearly, that the real earnings of the country 1 raise, since the goods, which it directs abroad (), give rather big profit whereas the goods purchased abroad, became rather cheaper. As a result of real earnings growth that became a consequence of change of the relative prices, the country 1 will aspire to acquire more both goods H, and d's goods, acquisition of goods H as a result of real earnings growth reduces number of goods H intended for export. Therefore the income effect or effect of terms of trade works in an opposite direction in comparison with a substitution effect and effect of production.
When the effect of replacement and production is together stronger, than the income effect, offer curve has the inclination directed upwards or a "normal" kind. However, if the income effect prevails over two others, offer curve will have a part with a worsening inclination or an inclination back. It is obvious, if the income effect simply corresponds to two other effects, offer curve will be vertical and will have individual elasticity. In the end, the form offer curve - a question empirical.
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